After accumulating a certain amount of wealth, families have to think about where to invest and how to preserve. There is an abundance of options out there available to analyze. If you decided to work with a professional partner and not do it all on your own, you have two choices to take and we will dig through the main differences between them.
Depending on what these needs are there are advantages and disadvantages to both options. In this article we shed light on external asset managers.
External asset managers work independently from banks. They can help you open accounts at third party banks also known as Custodians and receive a power of attorney over the accounts in order to facilitate asset management. The fee they receive can be in the form of management, retrocessions and or fixed. This highly depends on the modality of the relationship and how they are structured.
External asset managers can personalize many services down to a fraction and lower minimums than going directly to Private banks. Due to the worldwide rapid growth of wealthy individuals, tailor-made personal services at Private banks are rare, unless you are an ultra high net worth individual. A private banker working for one of the larger Swiss private banks may be expected to manage a large number of client relationships. In contrast, external asset managers can manage a smaller amount in then provide world class service. With external asset managers you have direct access which is not always possible in a large bank with many branches in several countries. Most private banks have considerable staff fluctuations whereas with external asset managers they are in business until retirement and sometimes after that.
Great external asset managers are independent and are unbiased in their product and service selection. There is no hidden agenda and usually do not sell or provide any in-house products. At banks, employees have strict sales targets, that may jeopardize their independence and influences them in the advice they give to you. Banks have countless in-house funds and products that they have an interest in selling to you. External asset managers have no incentive in advising you to do or buy anything that does not seem to be beneficial to you. External asset managers can be relied on for absolute independence when it comes to their advice and portfolio managed.
Working with external asset managers you are flexible when it comes to choosing a custodian bank, which usually is more than one and in more than one booking center. External asset managers work together with several different banks and you choose which one suits you best. You can also open more than one account but still have the same contact for both. For any reason if you do not like the bank anymore, you can always ask the asset management company managing your affairs to change it.
External asset managers usually have lower minimum investment sizes than if you were to go to the bank directly. Private banks do not onboard clients under USD 1m but if you connect with an external asset managers you could probably open the same account at same bank for USD 500k or even less. External asset managers tend to receive a favorable institutional pricing which is way less than a private bank.